Employer Coverage Or Full Medicare? How To Decide

The question I receive more than any other when someone is turning 65 and becoming eligible for Medicare is “What do I do about Medicare if I am still working and have coverage through my employer?

There are several different issues to consider when answering this question.

The first thing to know is when you turn 65 and are still working, you have a choice between staying on your employer’s coverage or leaving that coverage and going on full Medicare.

Charles Bradshaw

By “full Medicare” I am referring to having both Medicare Parts A and B along with a Medicare Supplement to pay your share of Medicare and a Medicare Part D drug plan to pay most of the cost of any medications you take now or may take in the future .

In many situations it is advisable to enroll in Medicare Part A only even if you have employer coverage. Medicare Part A has no monthly premium and may cover some of your costs if you have an in-patient hospital stay or skilled nursing stay. This is not “full Medicare.”

When choosing between staying on employer coverage and or leaving employer coverage and going on full Medicare, the choice requires a comparison of your monthly costs under both options as well as your potential costs if you become sick. This is not a choice the Employee Benefits department at your employer can help you make. In fact, federal law prohibits employers from assisting employees with evaluating their Medicare options even if full Medicare is the best option for the employee.

Let’s start with full Medicare first. In most states, you will pay a little less than $300 per month for Medicare Parts A and B as well as a Medicare Supplement and Medicare Part D drug plan. With this coverage, you will have a once-a-year Medicare Part B deductible of $183 and after that all of your medical costs will be covered 100 percent for the rest of the year.

Now, compare this cost to not only what you will pay per month for your employer coverage but also what your potential out-of-pocket costs may be if you become sick or have an accident. In many situations, your monthly cost for your employer coverage may be a little less than you would pay with full Medicare but your deductible and other out-of-pocket costs may be much higher than with full Medicare.

Many employer plans now have annual deductibles as high as $3,000 or $4,000 or even more and out-of-pocket maximums of $6,000 or more. If you have existing health issues, you may already be certain to spend some or all of such a high deductible and out-of-pocket maximum every year.

In most situations, it only takes a minimal amount of annual health care needs each year to make full Medicare a less costly option than employer coverage because of the higher deductibles and out-of-pocket maximums with most employer coverage.

The choice between staying on employer coverage and going on full Medicare is not a one-time decision. Once you are past your Medicare eligibility date, you can choose to leave employer coverage at any time to go on full Medicare. This includes during the middle of the year. You do not have to wait until your employer’s annual election process.

There are a few additional things to consider when choosing between remaining on your employer coverage or going on full Medicare.

You may need to stay on employer coverage to maintain coverage for your spouse or dependent if they are not yet Medicare-eligible.

If you take any expensive medications, those medications may be covered at a lower cost with employer coverage than with a Medicare Part D drug plan.

If you contribute to a Health Savings Account (HSA) with your employer coverage, you will no longer be able to do so once you enroll in Medicare Part A – even if you do not enroll in Medicare Part B.

With full Medicare, you can receive health care from any doctor or hospital anywhere in the country that accepts Medicare as almost all do. This means you may have more choices in your health care providers than you would given the network limitations of most employer coverage.

In some states – such as Florida – you will pay more for your Medicare Supplement if you first enroll at an age later than 65. While this is not a major cost difference, it could make choosing to move to full Medicare the best choice if the decision is a close call.

There is almost no situation where it is a good idea to enroll in Medicare Part B while you have employer coverage. The cost for Medicare Part B is $134 per month and the combination of both coverages rarely pays any cost that full Medicare would not already pay. In addition, by starting Medicare Part B while you still have employer coverage, you may lose some options for choosing a Medicare Supplement you will eventually need once you eventually leave your employer coverage.

Whether you are about to turn 65 and become eligible for Medicare or if you are 65 or older and still on employer coverage, I would appreciate the chance to work with you to help you compare your employer coverage options with full Medicare.

Simply click on the link below to schedule a free, no-obligation Medicare consultation.

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